The Martin Lewis Money Show Live returned to STV for the start of its fourteenth season on Tuesday with a jam-packed programme full of the latest consumer news, energy help and a massive update for millions of vehicle owners across the UK who may be due a £1,100 refund on car finance. The consumer champion explained to viewers how a new landmark court ruling has sent “shockwaves through the car finance world”.
The founder of MoneySavingExpert (MSE.com) said: “In January, the financial regulator, the Financial Conduct Authority (FCA), launched its huge investigation. It was about Discretionary Commission Arrangements (DCA) – that’s where lenders said to car dealers and brokers, ‘you can make up the interest rate and if you push it high up we will give you more commission’ and this was done without telling consumers – so it was hidden.”
Martin added that consumers didn’t know about this ‘hidden DCA charge’, which was added to around 40 per cent of all car finance deals made between April 2007 and January 28, 2021. It’s worth noting that this may also affect people who took out finance to purchase a van, campervan or motorcycle.
Martin said the average payout, if it happens, would be £1,100 – but it could be more. However, he warned that the further back you go,the more difficult it might be to provide evidence that you had car finance and may have had a DCA applied.
This is because consumers were not aware of the hidden commission being added, only the lender.
He explained the only way to find out if you had a DCA added is to make a complaint – more than 2.4m people have used the free online letter template to do this on MSE.com here.
Martin said it is “crucial” to do this now, even if the vehicle has been paid off for years, because the FCA ruling due in May may include a time-bar, which could exclude claims made after a certain date.
Landmark court case ruling
Martin explained: “This landmark ruling that happened at the end of last week has shocked the car finance world. It is a precedence-setting pro-consumer ruling, but the Court of Appeal is the second highest court. It can be appealed to the Supreme Court and they could turn it over but at the moment this is the law.
“They said a car firm cannot get commission without a customer’s ‘fully informed consent’, to get fully informed consent the customer must know all the facts including the amount of the commission which was never told. That is a radical clear viewpoint, it increases the likelihood of car finance mis-selling compensation by the FCA next May.
Martin went on to say that the FCA had delayed making its decision due to these court cases to see what the outcomes were.
He continued: “Now they’ve ruled in a pro-consumer way it’s strengthens the regulator’s hand and if it rules in the pro-consumer way then it is less likely to be successfully challenged in court under a judicial review because the courts have already given a view, subject to it going to the Supreme Court.
“I would not be surprised if they (FCA) were looking at extending this to all car finance commission, not just Discretionary Commission Arrangements.”
Full car finance refund guide on MSE.com
To help everyone who has already emailed their complaint, Martin and the team of experts have put together a complete next steps list.
This covers:
- What to do if you complained but had no response yet
- What to do if your complaint has been acknowledged, but no more information has been given
- What to do if you’ve had a response with options
The full guide, plus the template letter and an indication on when specific finance firms are likely to respond can be found on MSE.com here.
MSE.com’s five car finance commission mis-selling need-to-knows
- This is for those who bought a car, van, campervan or motorbike on PCP or Higher Purchase deals (not leasing) for primarily personal use between April 2007 and 28 January 2021.
- Lenders said brokers and car dealers had discretion to push the interest rates higher, and the more they did that, the more commission they’d receive. These were called discretionary commission arrangements (DCAs) and customers were rarely told about them. Around 40% of these car finance deals had DCAs, meaning millions overpaid without knowing. So without checking, people won’t know if it happened to them.
- In January 2021, the FCA banned DCAs, and in January 2024, it launched a huge mis-selling investigation. The deadline for dealing with complaints has been extended until the FCA reports its findings in May 2025.
- Martin Lewis believes it is unlikely the FCA would’ve launched such a huge public investigation unless it had strong evidence of systemic mis-selling. Yet he says until the FCA reports its findings, nothing is certain – and as one big risk is that there is a time bar placed on complaints, urges people to log a complaint as soon as possible, to avoid the risk of being timed out.
- There is no need to use a no-win, no-fee claims firm. With the totally free MSE tool, found here, you just answer a few questions on your car finance agreement (answers aren’t recorded, so as not to inadvertently data-mine) and then the tool builds an email to request information on whether you had a DCA, then logs a complaint.